Jason Mann discusses Apple
Apple Inc.’s planned stock split will diminish its influence on the Dow Jones Industrial Average after the iPhone maker’s 100 per cent surge since March lows nearly dragged the price-weighted measure back to an all-time high.
At its current price of US$452 a share, Apple has the biggest weighting in the index at 11 per cent. A 4-to-1 split now would drop its price tag to about US$113 and send its ranking in the Dow Average down to 16th. Apple has rallied almost 55 per cent in 2020, adding more than 1,100 points to a stock measure that’s fallen about 2 per cent during that time. The split is scheduled to take effect Aug. 31.
In a world where passive investing rules the stock market, a drop of weight in indexes like the Dow Average is likely to prompt outflows from money managers who mimic benchmark changes. About US$31.5 billion was either indexed or benchmarked to the gauge at the end of 2019, according to data from S&P Dow Jones Indices.
A stock split “is an appeal to retail,” said Charles Day, a UBS managing director and private wealth adviser with more than $600 million in assets under management. “It will make a difference for the Dow.”
The split, however, won’t affect Apple’s No. 1 position in the S&P 500, an index that’s weighted by market capitalization, rather than stock prices.
Apple has rallied the most in the Dow this year as locked-down consumers snapped up new iPhones, iPads and Mac computers to stay connected during the pandemic. While any selling as a result of the weighting change may pale in comparison to the company’s market value of US$1.9 trillion, it’s nonetheless not good news for a stock whose relentless gains are stirring angst at a time when tech shares have lagged behind the market over the past month amid valuation concerns.
Apple’s split is “theoretically decreasing demand from passive indexers,” Julian Emanuel, chief equity & derivatives strategist at BTIG LLC, wrote in a note. “Combined with a generalized loss of momentum in the Nasdaq 100, AAPL could succumb to Newton’s Law of Gravity in the weeks ahead.”